TeachMeFinance.com - explain Export Credit Guarantee Programs (GSM-102-103)
Export Credit Guarantee Programs (GSM-102-103) The term 'Export Credit Guarantee Programs (GSM-102-103)' as it applies to the area of agriculture can be defined as 'The Commodity Credit Corporation finances export credit guarantee programs for commercial financing of U.S. agricultural exports. The programs finance the sale of exports to buyers in countries where credit is needed but where financing may not be available without CCC guarantees. Two programs back up credit extended by private banks in the United States (or in some instances by the U.S. exporter) to approved foreign banks using dollar-denominated letters of credit to pay for food and agricultural products sold to foreign buyers. The Export Credit Guarantee Program (GSM-102) guarantees credit terms up to 3 years. The Intermediate Export Credit Guarantee Program (GSM-103) guarantees longer term credits up to 10 years. Under these programs, the CCC does not provide financing, but guarantees payments due from foreign banks. Typically, 98% of principal and a portion of interest at an adjustable rate is covered. Because repayment is guaranteed, U.S. financial institutions can offer credit on competitive terms to foreign banks, usually with interest rates based on the London Inter-Bank Offered Rate (LIBOR)'.
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